The patent strategy of Bill, Steve and Horacio seems to be alive and well even in their absence

Full, 6-frame explanation of Microsoft's strategy

“People that use Red Hat, at least with respect to our intellectual property, in a sense have an obligation to compensate us.”

--Steve Ballmer

Summary: News about Intellectual Ventures and Finjan Holdings (Microsoft-funded patent trolls) reinforces our allegations -- not mere suspicions anymore -- that Microsoft would 'punish' companies that are not paying subscription fees (hosting) or royalties (patent tax) to Microsoft and are thus in some sense 'indebted' to Microsoft

THE analysis we presented here last month turns out to be very accurate. Our predictions didn't take long to materialise.

Let's start with some background. In spite of courts in the US limiting the patentability of software, the USPTO keeps granting these and failing to invalidate those already granted, unless someone petitions PTAB to look into particular patents. This means that, for the time being, even bogus patents continue to exist and they can be used for litigation. Challenging them, especially if they are used in bulk, can be very expensive (legal fees). Recently, some companies challenged Intellectual Ventures' claims against them and won. All of the software patents of Intellectual Ventures were found to be invalid. But at what cost? These cases had to be escalated all the way up to CAFC before that happened. How many companies out there can afford justice and how rarely would that be an option cheaper than just settling?

"How many companies out there can afford justice and how rarely would that be an option cheaper than just settling?"Nowadays, a lot of small companies choose the so-called 'cloud' for hosting. There are numerous reasons for this and they don't typically receive legal protections or indemnification from the host. There have already been cases where companies got hit with a lawsuit (or more) for a bunch of virtual machines.

This new article by Richard Kemp, providing a good example of what we mean by cloudwashing of software patents (adding something like "on the cloud", in order to fool examiners into granting software patents, thinking these are novel and combined with a machine).

"Cloud software patent claims will likely increase as more users migrate to the cloud," it says in the summary, alluding in particular sections about trolls to this phenomenon. Here are the relevant parts:

As the public cloud services market continues to mature and grow – up from $178bn in 2015 to $209bn in 2016 according to research company Gartner - the concentration of computing resources into cloud data centres is increasingly attracting the attention of Non-Practising Entities (NPEs) as a target for patent litigation. At a time when data security and privacy risks are front of mind for cloud service providers (CSPs) and their users, the intellectual property (IP) risks to cloud service availability posed by NPE patent claims are rising up the business agenda.

NPEs are businesses that assert patents through litigation to achieve revenues from alleged infringers without practising or commercialising the technology covered by the patents they hold. NPEs are uniquely well placed to monetise their patents at each stage of the litigation cycle. They have access to capital and all necessary forensic and legal resources; and an NPE doesn’t practise its patents so is immune to a counterclaim that a defendant might otherwise be able to bring against a competitor, or a cross-licence that the defendant could otherwise offer.

[...]

From the CSP’s standpoint all this is bad enough, but software patent risks are further exacerbated by increasing use of open source software (OSS) in the cloud. OSS, long in the mainstream, now commonly powers cloud computing systems. OSS developments are created by communities of individual developers. With no single holder of software rights, patent infringement issues are unlikely to be top of mind, and if they are, developers will generally lack the resources to help them navigate the risks. Simply because they are open, OSS developments and communities are easier targets for NPEs than proprietary software as they don’t need to go to the same lengths to discover potential infringement. The softness of the target increases risk for CSPs using OSS and their users.

Cloud software patent risk is evident and growing, so it is perhaps surprising that it has figured so little in the register of perceived risks up to now, especially when data protection, privacy and information security figure so high. Yet an unsettled cloud software patent claim runs risks to cloud service availability that are arguably of the same order as information security risks. The reason why cloud computing IP risks have had little public airing so far is probably that, while implicitly acknowledged, they have yet to be thoroughly expressed and articulated. For example, in UK financial services, now one of the most heavily regulated sectors, cloud computing is treated as outsourcing and in its cloud guidance, the FCA (Financial Conduct Authority, the UK regulator) states that regulated firms should, amongst other things: “monitor concentration risk and consider what action it would take if the provider failed ….”

How does that relate to Microsoft? Now comes the key part. Microsoft is trying to turn Azure into its new cash cow and it is also trying to turn its patents into cash cows. It's now doing in the cars what it's planning to do in the 'cloud', namely demand payments for patents (where [GNU/]Linux is used), otherwise send a bunch of trolls to make a legal mess. The Mafia model.

"It's now doing in the cars what it's planning to do in the 'cloud', namely demand payments for patents (where [GNU/]Linux is used), otherwise send a bunch of trolls to make a legal mess. The Mafia model."The other day we wrote about what Microsoft and its biggest troll (Intellectual Ventures) had been doing lately, having recently written about Microsoft marketing of "Azure IP Advantage" [1, 2, 3, 4, 5, 6, 7] -- eerily similar in many ways to the Microsoft-Novell patent deal.

It looks like Microsoft is already siccing its patent trolls on companies that don't pay 'protection' money, we noted, and now it looks like we have another new example, as covered yesterday by friends of Intellectual Ventures, IAM magazine. To quote the relevant bits:

The auto industry has been a hive of patent activity for several years. Manufacturers and suppliers are far more sophisticated players in terms of their own patenting, have become more assertive in fighting claims and are increasingly signing-up to defensive initiatives such as the LOT Network and Unified Patents. The emerging dynamics in the sector were on full display in two separate developments this week.

First up, on Monday, Intellectual Ventures filed seven lawsuits in Delaware against Toyota, Honda and BMW, and the suppliers Denso, Nidec, Aisin Seiki and Mitsuba. Each has been accused of infringing between one and five patents. IV has been attempting to license the auto sector for several years and in a significant boost to its efforts did a deal with Ford in 2015. Obviously not everyone in the industry has been as willing as Ford, hence this week's move.

[...]

On Wednesday Microsoft announced that it had agreed a new patent licensing deal with Toyota that includes broad coverage for connected car technologies. That deal, the software giant says, is the first in its new auto licensing programme; and so we can presumably expect some similar announcements in the coming months. The deal release was light on details, but the two companies have an existing IP relationship thanks to Microsoft’s recent Azure IP Advantage initiative, which Toyota was quick to sign up to. What will be interesting to follow is how any upcoming deals are structured given that Microsoft’s recent focus has been on using its IP as leverage in getting more of its products onto devices rather than as a driver of licensing dollars.

The Japanese car giant is clearly looking to ensure it has freedom to operate in a rapidly changing market. That strategy, so far, has not included signing a licence with IV — which Microsoft was an early investor in — but the Delaware lawsuit might bring things to a head.

The Microsoft-Toyota patent deal was mentioned here the other day. We later said that Microsoft is using software patents against GNU/Linux and relies on secrecy around what's covered (Android, file systems, etc.); for those who don't yet know, Toyota was historically close to Microsoft, but it recently defected to the Linux camp. Microsoft can't be too happy about that. Here are three items from the news:

• Toyota licenses Microsoft's portfolio of connected car patents

  In a blog post, Microsoft Intellectual Property Group chief IP Counsel Erich Anderson suggests the company's software patents will play a significant role in the automotive industry's "digital transformation" as more vehicles are connected to the internet and cloud services.





• Microsoft expands connected car push with patent licensing

  Rather than trying to build a high-tech automobile of its own, Microsoft is focusing on providing carmakers with the tools they need to create smarter vehicles and the Toyota deal is the first of what it hopes will be a series of such agreements.

  [...]

  The deal signed with Toyota includes intellectual property {sic} related to information processing technology and communication technology used in connected cars. In typical Microsoft fashion, the terms of the deal beyond that have been kept secret.

  
  
  

• Daimler Jumps on Linux Bandwagon

  Not long ago, if a major corporation were to take out membership in an open source project, that would be big news -- doubly so for a company whose primary business isn't tech related. Times have changed. These days the corporate world's involvement in open source is taken for granted, even for companies whose business isn't computer related. Actually, there's really no such thing anymore. One way or another, computer technology is at the core of nearly every product on the market.
  
  So it wasn't surprising that hardly anyone noticed earlier this month when Daimler AG, maker of Mercedes-Benz and the world's largest manufacturer of commercial vehicles, announced it had joined the Open Invention Network (OIN), an organization that seeks to protect open source projects from patent litigation. According to a quick and unscientific search of Google, only one tech site covered the news, and that didn't come until a full 10 days after the announcement was made.

That third one is particularly noteworthy as Daimler may be looking for some sort of protection though OIN -- a protection that will not come for reasons we explained some days ago. There's no redemption from trolls there, by OIN's own admission. OIN has in fact done nothing against Microsoft's latest patent manoeuvres against Linux. Nothing.

"Our prediction is that in various fields, be it security, car navigation, or anything "on a cloud" Microsoft will send trolls to wreak havoc unless/until the victims join some Microsoft 'protection' scheme such as "Azure IP Advantage"."To clarify, Intellectual Ventures is not the only Microsoft-connected troll which is storming and suing companies that Microsoft dislikes, particularly Linux distributors (e.g. devices). There are a lot of Microsoft-armed and Microsoft-funded trolls out there (we've named many over the years). Last night in the news for example, we saw this patent troll which is connected to Microsoft (even financed by it) settling with Avast. Based on the wording, it's maybe a settlement or 'protection' money (they don't say), but the text does say "Finjan remains, in various capacities, involved in patent-associated cases against FireEye, Sophos, Symantec, Palo Alto Networks, Blue Coat Systems, ESET (and affiliates) and Cisco Systems."

Finjan is a troll (as last mentioned earlier this year) and it seems to be going after every security company out there, equipped with nothing but software patents which we looked at closely in the past. Our prediction is that in various fields, be it security, car navigation, or anything "on a cloud" Microsoft will send trolls to wreak havoc unless/until the victims join some Microsoft 'protection' scheme such as "Azure IP Advantage". ⬆